77 Cr Cash Deposit Addition Remanded; Illness & Tech Challenges Valid Causes for Non-Appearance

77 Cr Cash Deposit Addition Remanded; Illness & Tech Challenges Valid Causes for Non-Appearance

Issue

Whether an ex-parte assessment treating cash deposits of Rs. 1.77 Crores as unexplained money under Section 69A is valid when the assessee (a rustic villager suffering from kidney ailments) could not participate in the online proceedings due to illness and lack of technical knowledge.

Facts

• Assessee: An individual, claimed to be a rustic villager and under-matriculate.

• Assessment Year: 2017-18.

• The Transaction: The AO noticed cash deposits aggregating to Rs. 1,77,13,895/- in two current accounts with Punjab National Bank.

• Non-Compliance: The assessee did not file a return of income (u/s 139(1)). Notices issued u/s 148 and 142(1) were not responded to.

• AO’s Action: Due to persistent non-compliance, the AO passed a Best Judgment Assessment (u/s 144), adding the entire deposit amount to the income as unexplained money u/s 69A read with Section 115BBE.

• CIT(A)’s Action: The CIT(A) dismissed the appeal, noting that despite 5 hearing notices, no evidence was submitted to substantiate the claim that the deposits were from fruit/vegetable business and agriculture.

• Assessee’s Plea:

  • Health: He was suffering from serious kidney problems and was hospitalized multiple times.

  • Tech Barrier: Being uneducated and from a village, he did not understand emails/SMS and relied entirely on an accountant who failed him.

  • Source: He claimed the cash was from genuine agricultural produce and fruit trading, arguing for the application of presumptive tax (Section 44AD) rather than Section 69A.

Decision

1. Sufficient Cause Accepted:

• The Tribunal accepted the assessee’s plea that non-compliance was neither willful nor deliberate.

• Factors like serious illness (kidney ailments), being a rustic villager, lack of education (“under-matriculate”), and unfamiliarity with the faceless/online system constituted sufficient cause for not appearing before the lower authorities.

2. Remand for Fresh Verification:

• The Tribunal noted that the assessee claimed to have evidence regarding the agricultural/trading source of the cash but couldn’t produce it earlier.

• Verdict: In the interest of justice, the order of the CIT(A) was set aside. The matter was restored to the file of the AO for fresh adjudication.

3. Direction:

• The AO must admit the additional evidence produced by the assessee and decide the case afresh.

• The assessee was directed to cooperate fully this time. [Matter Remanded]

Key Takeaways

• “Rustic Villager” Defense: Tribunals are often lenient towards taxpayers from rural backgrounds who miss digital notices (emails/SMS) due to illiteracy or lack of technical access, provided they have a genuine case on merits.

• Medical Grounds: Documented serious illness (like kidney failure/hospitalization) is almost always accepted as a valid reason to condone non-appearance and grant a fresh hearing.

• Section 69A vs. Business Turnover: If the source of cash deposits is proven to be business turnover (e.g., fruit trading), the entire deposit cannot be taxed as income. Only the profit element (e.g., 8% u/s 44AD) should be taxed.